Court Holds Amazon Liable for 3rd-Party Vendor Products

Recent ruling may affect Amazon’s business model

 The 3rd U.S. Circuit Court of Appeals in Philadelphia recently court ruled against Amazon.com Inc., overturning several lower court rulings. This reversal may expose Amazon to lawsuits filed by customers purchasing defective products from third-party vendors selling on the retail website.

The court ruled that Amazon may be held liable in part because its business model “enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor.”

Heather Oberdorf sued Amazon in 2016 alleging a product she purchased on the website permanently blinded her one eye. While walking her dog, the retractable dog leash purchased through a third-party vendor snapped, recoiled and hit her eyeglasses.

The panel sent the case back to the lower court, which will have to decide whether the leash was actually defective. The court noted that the immunity provision in the Communications Decency Act doesn’t shield Amazon from liability for “selling, inspecting, marketing, distributing, failing to test, or designing” the dog leash. However, the court failed to uphold Oberdorf’s claims of Amazon’s failure-to-warn.

Amazon and Product Liability

State law generally dictates liability for defective products. The Furry Gang shipped the leash directly to Oberdorf from Nevada. But the Amazon ruling was based on Pennsylvania law because that’s where the customer resides. The Furry Gang has not been active on Amazon’s site since 2016.

Approximately 50% of the products items sold on Amazon are from third-party companies. These third-party vendors have the ability to store their products in Amazon’s warehouses or ship directly to customers. These sellers pay Amazon a commission on sales and additional fees for storing, packaging and delivering their products. Amazon has used the fact that it doesn’t own the inventory to protect itself from product liability cases. Obviously, this ruling could change things dramatically for Amazon.

“It’s gratifying that the 3rd Circuit agreed with our argument and recognized that the existing interpretation of product liability law in Pennsylvania was not addressing the reality, the dominance that Amazon has in the marketplace,” said David Wilk, Oberdorf’s lawyer.

Sources:
  • Brendan Pierson. “Court Holds Amazon Liable for Products of Other Vendors Sold on Its Site,” com. 08 July 2019.
  • Edvard Pettersson, Spencer Soper, and Martina Barash. Ruling Against Amazon May Prove Broader Blow to Its Business Model.” com. 03 July 2019.

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